THE Queen faces a stringent review of the Royal Family’s finances after three bumper years in which public funding of the monarchy has risen by nearly a third.

Buckingham Palace is braced for a potentially far-reaching review of funding arrangements for the monarchy amid growing criticism of the current deal, which leaves the Royal Household insulated from the worst of the austerity measures facing the rest of Britain, including a £12 billion cut to the welfare bill.

Under the Sovereign Grant Act, the amount of public money paid to the Royal Family cannot be less than the previous year.

Since 2012-13, the Sovereign Grant, the main form of public funding for the monarchy, has risen 29 per cent from £31million to its current level of £40 million under a formula which pegs it to 15 per cent of the profits of the Crown Estate, a property empire which has delivered its surplus to the Treasury since 1760.

A further rise in funding is expected to be announced next month but by April next year that 15 per cent figure is to be reviewed by the Royal Trustees - Prime Minister David Cameron, Chancellor George Osborne, and the Queen’s Keeper of the Privy Purse, Sir Alan Reid - under arrangements stipulated in the 2011 Act.

Britain’s leading taxpayer group urged the trustees yesterday to re-examine the whole funding formula and the legal guarantee that, unlike just about every other public institution and Government department, the monarchy cannot see its income fall.

Jonathan Isaby, chief executive of the TaxPayers’ Alliance, said: “Britain’s finances are in a terrible state, and that means no area of public spending should be simply signed off. Restraint where possible should always be welcomed.

“It seems odd to guarantee that, in effect, the budget will never go down. We need to look again at the settlement to ensure that the costs of the Royal Family are kept under control.”

The Queen, who yesterday visited another source of funding for the monarchy, her hereditary Duchy of Lancaster estate - which pays for the offices of Princess Anne, Prince Andrew, the Earl and Countess of Wessex and several other royals - has seen a dramatic change in her financial fortunes in the last three years under the new Sovereign Grant, which in 2012-13 replaced the old Civil List.

Britain’s finances are in a terrible state, and that means no area of public spending should be simply signed off. Restraint where possible should always be welcomed.

Jonathan Isaby, chief executive of the TaxPayers’ Alliance

After building up a £35 million surplus under the Tories in the 1990s, she faced tough times under Labour when the Civil List was maintained at its 1991 level of £7.9 million for two decades and aides complained that there was not enough money to maintain the crumbling royal residences.

Palace officials, who have recently made four people redundant out of a staff of 1,200 - including around 450 funded by the taxpayer - have sought to run the Royal Household more efficiently and are now finally dealing with the backlog of repairs.

Royal commentator Joe Little, managing editor of Majesty magazine, insisted the head of state and her family had to be properly funded.

“The Royal Family cost every person in Britain only 56p last year. The British monarchy has to have a degree of dignity to do its job properly,” he said.

But Graham Smith, chief executive of anti-monarchy group Republic, argued for radical reform.

“A 29 per cent increase in royal funding while public services and welfare are being slashed is beyond disgraceful.

The funding review should be brought forward immediately, with a view to slashing the cost of the monarchy,” he said.

With income from other sources, including the Duchies of Lancaster and Cornwall, and taxpayer funding of the bill for security, Armed Forces involvement in royal ceremonies, local government planning for royal visits and other expenditure, the total cost to the taxpayer of the monarchy is put at nearer £300 million.